FROM BUSINESS WORLD OF 7 SEPTEMBER 2005
Itching for a fight
Two months ago I wrote how the Department of
Telecommunications (DoT), led by its minister, Dayanidhi Maran, had sabotaged a
number of reforms suggested by Telecom Regulatory Authority of India (TRAI).
Then a higher authority asked Maran for an explanation; he told it that DoT was
considering TRAI’s recommendations. DoT may study them for eternity. This time,
I shall look beyond Maran’s sins of omission, and detail his sins of
commission.
A broad division of functions was worked out over the
years: TRAI, as regulator, would police pricing and competition, whilst the
Department of Telecommunications (DoT) would be in charge of licensing and
policy. It is an untidy division, for licensing brings in new competitors and
changes operators’ territory; it therefore affects competition. This is why the
first TRAI under Justice Sodhi insisted that it must be consulted on licensing
decisions. In the battle that followed, that TRAI was consumed, and another,
packed with DoT’s cronies, was created. Private operators, whom DoT had driven
to the wall by means of licence fees, interconnection fees and pricing
restrictions, were revived by replacing fixed licence fees by share of revenue;
and DoT’s daughters were given cellular licences to bolster their
competitiveness.
The new dispensation worked well after TRAI got a chairman
who had worked under the minister, Arun Shourie, as secretary. The two had an
ambitious plan of unifying all types of licences and thereby taking the fetters
off competition. But Shourie was swept out of power, and was replaced by
Dayanidhi Maran, a young minister with much energy and ambition. He has been a
godsend for DoT; it plays on his impatience and uses him as a battering ram in
its attacks on the regulator.
In August, DoT threatened to overturn TRAI’s dispensation
on access deficit charge (ADC). ADC is basically a cross-subsidy from private
operators to government operators. It taxes long-distance charges, and
subsidizes the rentals of public sector telephone operators’ (PSTOs’)
fixed-line subscribers. (It is NOT a cross-subsidy to rural connections; they
are financed separately from another, USO charge; it is 5 per cent of
operators’ revenue, and is not related to long-distance charges.)
ADC used to be a cross-subsidy within the PSTOs’ accounts
from trunk callers to local callers; but as long-distance charges fell, the
PSTOs’ profits declined. So they used their mother the DoT’s political clout to
make private operators finance it. The subsidy is entirely unmerited. But the
PSTOs’ fixed-line subscribers are numerous and have the ear of members of
Parliament; DoT has used their political pressure to make TRAI introduce a tax
on long-distance charges, which is paid by private operators as well.
TRAI announced that PSTOs’ profits were rising, so it
would cut down ADC. For months, Maran has been making statements that TRAI must
not reduce ADC below Rs 50 billion. TRAI declined to oblige. Now, DoT has
claimed that ADC is “policy matter”; it
threatens to deprive TRAI of authority over it. And what is its authority for
doing so? It is Section 25 of the TRAI Act of 1997, which says that the
government may issue instructions to TRAI in the interests of “the sovereignty
and integrity of India, the security of the State, friendly relations with
foreign States, public order, decency or morality.” And which of these, pray,
is the ADC supposed to protect? Sovereignty? Integrity? Security? Morality?
Decency? Come off it, DoT; if you can make anyone buy that, he must be an ass –
even if he happens to be your minister. This order, if it was ever issued,
would be a brazen scam. Nothing could be more within TRAI’s jurisdiction than
ADC; DoT’s self-interest is written all over its intention to misuse the law.
And then, Maran has a pet scheme – the One India plan. It
involves introducing a single, flat-rate charge for all trunk calls within the
country. Just why? Maran still has to explain. And how does one reconcile such
an unvarying price with competition? One cannot. Essentially, Maran wants to
introduce a controlled price, not susceptible to competitive forces, in
long-distance telephony. And this too can be introduced only if DoT makes a
travesty of the law, for pricing is squarely within TRAI’s jurisdiction.
I am afraid that Maran has been willingly,
enthusiastically misled by a narrowly self-seeking department. Unless he is
restrained, he will make irreversible damage to the telecommunications
industry. But he is only the instrument; the guilty party is the department.
The day the regulator was created, it should have been shut down. The regulator
is an alternative form of government; it long ago made DoT redundant. That is
why it cannot abide the regulator.
